US Government Should Provide Debtor in Possession Bankruptcy Support to General Motors

GM's Rick Wagoner is turning to Chrysler, Toyota and the US government for support. The government should commit to giving support, but not in the form requested.

GM, Chrysler and Ford have become the country's great embarassments.  Now that they see the government giving hand-outs, they are jumping in line asking the government to bail them out of their messes.  Like the banks, these messes are of their own making.  But, unlike the banks, these companies don't have balance sheets that the government needs to protect or preserve in order to protect the economy.  Rather, the industry may need to be preserved, but the companies which have become too inefficient to compete on the global stage.   These companies themselves need to be completely transformed following bankruptcies that would break down their dreadful managements and remove their unions and remove their other obligations.  The Treasury should announce that it will provide this support in the form of a debtor-in-possession type of bankruptcy funding, but no other support whatsoever.  Such an announcement will serve to accelerate the inevitable and proper outcome (bankruptcy and restructuring), and can end the pain or watching incompetent business leaders like Rick Wagoner and Bob Nardelli run around trying to preserve themselves instead of their businesses.    

Ari Socolow
Ari Socolow: Ari Socolow is the Chief Economist and Editor-in-Chief at BestCashCow. He is particularly interested in issues relating to financial literacy and bank transparency. Since co-founding this website in 2005, Ari has been frequently cited in the media as an expert on local and national savings accounts, CD products, mortgage and loan products and credit card rewards products.

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